Hiked wages for USA’s H1B visa bearers force Indian ITs on hiring locally - January 07, 2017

Hiked wages for USA’s H1B visa bearers force Indian ITs on hiring locally

As the US Congress reintroduces bills to force strict laws for bearers of H1B visas, Indian IT service firms might have to start looking for hiring more locally there. The new proposed bill would require workers bearing H1B visas (which makes up a huge volume of employees belonging to Indian IT firms), to be remunerated minimum wages of USD $100,000 compared to USD $60,000 presently. The bill, namely ‘Protect and Grow American Jobs Act’, would scrap the exemption of Master's degree from the norms of H-1B visa.

In the event of Indian IT service providers seeing a least effect on margins due to the wage rise, they would need to focus on extra local hiring, according to industry analysts.

Even though Trump was able to win the presidential elections in the US, with promises of getting jobs back to the country, he stated last month that the Trump administration will not let bearers of H1B visas replace the jobs of US citizens.

"The proposed bill to hike the minimum wage for foreign workers in the US who hold H-1B visa from $60,000 to $100,000 may not have a significant impact as they already pay between $75-80K to the employees with 0-2 years experience and for manager level with more than 5 years of experience the wage is usually above $100,000," stated Pareek Jain, the head of HfS Research India.

For Indian IT firms, the strain would be on expanded local hiring. "Such wage hikes may hit their margins initially but going forward they will have to rethink over more local hiring," said Jain.

Conversely, computer science or entry-level engineering graduates from USA would cost more than $100000. It might vary depending upon location. For e.g. it may be highest in the Bay area and lesser in smaller cities of the US.

IT services companies have traditionally seeked cost cutting by employing Indians onsite. India Head and Partner, Dinesh Goel, at a tech research firm called ISG, thinks that such radical strategies might harm the economy of USA. "Cost is one aspect. But I will be surprised if they are really radical. A stricter immigration law towards H1B visas is likely to hurt the American economy, as the people working with foreign IT companies in the US holding H1B visas are adding value to American companies."

With the Industry observing a shift from traditional services into delivery of digital technology, they would need additional on-site deployment. "As a trend, the technology services sector is seeing more localization and reduction in off-shoring. So it will be wise to make such reforms gradually with the industry trend," stated Goel.

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